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Judgment
By the present petition the petitioners seek to challenge the order of assessment whereby the petitioners have been held liable to pay Purchase Tax (Purchase Tax) on gold purchased from MMTC under a Replenishment License u/s 13AA of the B.S.T. Act. The petitioners are also aggrieved by the action of the respondents in charging purchase tax on a vehicle purchased for the use of its employees as also consequential charging of interest u/s 36(3)(b) and penalty u/s 36(2)(c) (Explanation 1) as also penalty u/s 36(4A) of the Bombay Sales Tax Act.
A show cause notice was issued to the petitioners. The petitioners filed their reply to the said show cause notice on 3rd October, 1997 denying their liability to pay purchase tax on purchase of gold. There was no specific denial in so far as purchase tax on the purchase of vehicle. The A.O., was pleased to pass an order of assessment which was served on the petitioner on 28th November, 1995.
The petitioners being aggrieved by the order preferred an appeal before the Appellate Authority. In the course of the Appeal, the Appellate Authority was of the opinion that the S.T.O., while assessing the Appellant did not levy P.T. u/s 13AA, though the goods fall into Part I of ''C'' Schedule attached to B.S.T. Act, 1959. A show cause letter was issued asking the appellants as to why P.T. u/s 13AA should not be levied along with consequential interest u/s 36(3)(b). The Petitioners filed reply to the show cause notice describing the procedure for purchase of gold from M.M.T.C. The petitioners also relied on various documents including Customs Notification. It was the submission of the petitioners that purchase tax u/s 13AA was not payable and alternatively if the P.T., is held to be leviable then set off u/s 42(1) be granted to the petitioners.
The Appellate Authority noted that the petitioners had filed Appeal challenging the levy of P.T. u/s 13 on the purchases of capital assets and had sought consequential relief in interest u/s 36(3)(b) of the B.S.T. Act. The Appellate Authority held that the contention raised by the petitioners that Purchase Tax was not payable had to be rejected. The Appellate Authority also held that their case was not covered by amended Section 16 of the Maharashtra Act 19 of 1996 as the petitioners had failed to prove that the purchases were effected from the person who is not a dealer. Consequently as the petitioner had not paid tax with the returns interest u/s 36(3)(b) on the balance due is legally attracted and as such levy of interest was confirmed. Dealing with the provisions of Section 13AA the learned Tribunal held that the sale effected by MMTC to the petitioners were against ''CK'' Forms by paying local taxes. The petitioner had placed purchase orders before the M.M.T.C. which speaks of outright purchase of gold and in the purchase order the petitioners had agreed to pay local taxes.
It may be mentioned that the petitioners with this petition have annexed a certificate dated 15th September, 1990 issued by the Sales Tax OfficerII on the declaration being filed in Form CK setting out that petitioner is authorised to purchase gold from MMTC without paying Sales Tax in view of the Government Notification dated 28th December, 1959 issued u/s 41 of B.S.T. Act on declaration in CK Form without paying sales tax.
The petitioner by this petition apart from challenging these orders of assessment in the alternative have also sought a declaration that Section 13AA as was in force between 1st April,1990 and 13th September, 1995 of the Bombay Sales Tax Act is as unconstitutional.
We will first examine the matter on merits and only in the event the relief as prayed for by the petitioner cannot be granted, do we propose to consider the challenge to the Constitutionality of the provisions though, in our opinion, prima facie such challenge is debatable as the Bombay Sales Tax Act has been enacted pursuant to the power in the State Legislature under Entry 54 List II of the Constitution of India.
Rule was issued on 9th July, 1998. The short question for our consideration is whether the petitioner is liable for payment of purchase tax on purchase of gold/bullion from MMTC. There is no dispute that the petitioner has an Industrial Unit at Seepz in Andheri East for manufacture of gold jewellery products for export.
The Government of Maharashtra by Notification of 25th June, 1990 was pleased to amend in exercise of its power u/s 41(1) of the Bombay Sales Tax Act with effect from 1st April, 1989 the Government Notification, Finance Department No. STA/1059 (iii) G1 dated 28th December, 1959 and after Entry 288 to include the following entry:
A perusal, therefore, of the said entry would show that the sales of Gold bullion covered by Entry 289 is exempted from the whole of the tax.
Tax has been defined u/s 2(32) as under:
"tax" means a sales tax, purchase tax, turnover tax, surcharge or resale tax, as the case may be, payable under this Act.
This was before the substitution by Maharashtra 25 of 1999 with effect from 31st March, 1999 and the previous amendment by Maharashtra 19 of 1995 with effect from 1st October, 1995. It would thus be clear that tax included purchase tax and the Government Notification exempted the whole of the tax.
It is the submission on behalf of the respondents that the petitioners would be liable to pay purchase tax and at the highest they would be entitled to set of under Rule 51.
Section 13AA before its substitution by Maharashtra 16 of 1995 with effect from 1st January, 1995 read as under:
133AA. Purchase tax payable on goods in Schedule C, Part I when unsold. Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through Commission agent, (from any person) then, unless the goods so purchased are resold by the dealer, there shall be levied, in addition to the sales tax, paid or payable, if any, or as the case may be, the purchase tax levied or leviable, if any, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the turnover of such purchases.
It is thus clear that if a dealer who is liable to pay tax under the Act on purchases of specified goods does not resell them is also liable to pay purchase tax. Therefore, apart from incidence of sales tax at the point where the sale takes place the incidence of purchase tax will arise in a case of nonsale if such person is a dealer. Even if these points are considered to be different in point of time, the fact remains that in the instant case the petitioners have been allowed to purchase Gold from MMTC under the Replenishment License for use in the SEEPZ area for the manufacture of articles of gold and jewellery for export. Ordinarily, therefore, u/s 13AA the petitioner would be liable to payment of purchase tax as there is no sale. However, considering the Government Notification earlier referred to the petitioner is exempted from payment both of sales tax and purchase tax. It is not possible to accept the contention of the Respondents that the tax referred to in the Notification is only sales tax and not purchase tax.
The second contention on behalf of the petitioner is that purchase tax was not payable u/s 13 on the purchase of a vehicle. It is the submission of the petitioner that the petitioner is not a dealer. Alternatively it is submitted that to be forming a part of the business, there must be some recurrence or continuity, Apart from that reliance is placed on Section 16(4) of the Maharashtra Act XII of 1996 to contend that purchase tax was not payable.
The Appellate Authority in its finding which is recorded has clearly held that the petitioner had failed to prove that the purchases were effected from a person who was not a dealer. The learned Counsel for the petitioner had sought to rely on two judgments of this Court, firstly, in the case of Commissioner of Sales Tax v. Billion Plastics Pvt. Ltd. 98 STC 106 (Bom.). A learned Bench of this Court in that case considering the expression ''dealer'' in the context of unregistered or not registered was pleased to hold that the the Section applies to purchasers from dealers who are unregistered or not registered. If the person from whom the purchase is made is a ''dealer'' in respect of the goods sold by him but not registered as a dealer the Section 13 would be attracted. Purchasers of goods from a person who is not even a dealer within the meaning of Section 2(11) of the Act will not fall within the purview of Section 13 and no purchase tax would be leviable in respect of such purchases. The Court further observed that purchases or sales of any and every goods by a person who is a dealer, cannot be regarded as purchases or sales by a dealer, unless such sales or purchases are in course of his business or incidental or ancillary thereto. This Court thereafter in Morarji Brothers (Import & Export) Pvt. Ltd. v. State of Maharashtra (1995) 99 STC 0117 was pleased to hold that a person carrying on the business of buying or selling certain goods cannot be regarded as a dealer in any and every goods sold by him without a finding that either he carries on the business of buying or selling such goods or that the sales of such goods are connected with or incidental or ancillary to his ''business of buying or selling goods''.
In our opinion it will not be possible to apply the ratio of the judgments of this Court in the absence of the petitioner having produced any material either before us or before the Appellate Authority. As noted earlier, on the contrary there is a finding against the petitioner that he had not established that the purchase was not from a dealer.
The Alternative submission is considering Section 12(4) of the Maharashtra 19 of 1996 as the petitioner had preferred an Appeal the petitioner would not be liable to pay the purchase tax. Section 16(4) reads as under:
16(4) When any dealer has effected any purchases from a person who is not a dealer and has not paid purchase tax u/s 13 of the Bombay Sales Tax Act in respect of such purchases only on the ground that such purchase tax is not payable on purchases effected from the persons who are not dealers and that no such tax could have been levied or collected if the the persons who are not dealers and that no such tax could have been levied or collected if the amendments made in the Bombay Sales Tax Act, by this amendment ordinance had not been made, and where such dealer has been assessed in respect of any period and he has objected to such levy in writing on the grounds as aforesaid and has filed an appeal against such order on the ground as aforesaid, then, notwithstanding anything contained in the Bombay Sales Tax Act as amended by this amendment ordinance, he shall not be liable to such purchase tax in respect of such purchases and before the date of commencement of this amendment ordinance.''
A perusal, therefore, would indicate that there are two requirements, firstly, an objection in writing and secondly that said person has preferred an Appeal against that order on the ground as aforesaid. In the instant case the petitioner may have taken the ground in Appeal, but as adverted to earlier in reply to the show cause notice no such objection was taken. The petitioner, therefore, is not entitled to take recourse to Section 16(4). That contention must, therefore, be rejected. The order of the A.O. And the Appellate Tribunal to that extent are upheld.
The A.O., and the Appellate Tribunal both had determined interest u/s 36(3)(b). Once we hold that purchase tax was not payable the question of the petitioner being liable for interest u/s 36(3)(b) in so far as gold is concerned will not arise and interest on P.T. To that extent will have to be set aside.
The matter in so far as P.T. On gold is remanded back to the STO for reworking the amount of interest only on the purchase of the vehicles in terms of our finding recorded in this judgment.
That leaves penalty u/s 36(2)(c) Explanation 1. Explanation 1 to Section 36(2)(b) requires that on assessment or reassessment the total amount of tax paid by the dealer with returns for any period is found to be less than eighty per cent of the amount of tax so assessed or reassessed or found due in appeal or revision or rectification, then, for the purpose of Clause (c) he shall be deemed to have concealed the particulars of the transactions or knowingly furnished inaccurate particulars of transactions liable to tax. In the instant case considering that we have held that the petitioner is not liable to pay purchase tax for the gold purchased from M.M.T.C. Explanation 1 would not be attracted. Even otherwise the petitioner had disclosed all particulars. The penalty on that count has to be set aside.
The penalty imposed u/s 36(4A) is in a sum of Rs. 200/. Though it is true that in so far as Gold is concerned we have held that no tax was payable nevertheless considering that we have held that tax was payable on purchase of capital asset namely motor vehicle, we find that no interference with the penalty u/s 36(4A) is called for.
Rule to that extent made absolute in terms aforestated namely the order to pay purchase tax is set aside. In so far as interest is concerned, matter is remanded back to S.T.O. For recomputing interest only on purchase of vehicle. Penalty u/s 36(2)(c) is set aside. However, penalty u/s 36(4A) is upheld. In the circumstances of the case there shall be no order as to costs.